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PRICE

PRICE. Factors Affecting Price. Costs & Expenses Supply and Demand Consumer Perceptions Competition Technological Trends Government Regulations Price gouging: price above mkt. when there is no alternative

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PRICE

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  1. PRICE

  2. Factors Affecting Price • Costs & Expenses • Supply and Demand • Consumer Perceptions • Competition • Technological Trends • Government Regulations • Price gouging: price above mkt. when there is no alternative • Price fixing: illegal; competing companies agree to restrict prices in a specified range • Resale Price Maintenance: price fixing imposed by manufacturer

  3. Pricing Strategies • Cost-based pricing: consider you business cost and profit objectives • Demand-based pricing: find out what customers are willing to pay • Competition-based pricing: find out what competitors charge

  4. Pricing Policies • Flexible-price policy: allow customers to bargain • One-price policy: all customers are charged same price

  5. Product Life Cycle • Intro.—sales are low, marketing costs are high, profits are low • Price skimming—charge high price to recover costs • Penetration pricing-build sales by charging low initial price to keep cost low for customer • Growth—sales climb rapidly, unit costs decrease, profits begin, competitors enter the market • Maturity—sales slow and profits peak; profits fall off as competition increases. • Decline—sales and profits fall; business cut prices to generate sales or clear inventory

  6. Pricing Techniques Psychological Pricing Discount Pricing • Prestige pricing • Odd/even pricing • Price lining • Promotional pricing • Multiple-unit pricing • Bundle pricing • Cash discounts • Quantity discounts

  7. Pricing Techniques continued Trade and Promotional Discounts Seasonal Discounts

  8. Calculating and Changing Prices • Break-even point: point at which the product price covers costs; gives you an idea on the number of units you must sell to make a profit Formula: (fixed cost divided by unit selling price)- variable costs=break even point in units • Markup: amount added to cost of product to cover expenses and ensure a profitCost+Price=Markup Markup / Cost=percentage markup on cost

  9. Standard Markup: use a standard markup percentage • Markdown: lowering price a certain percentage • Discounts

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